Some thoughts on asking for a raise

Venture capitalist and corporate board member Heidi Roizen shares her thoughts on asking for a raise, including one thing never to do when asking for more money.

Satya Nadella is that rare person who got far in life – indeed to the very top of Microsoft – without apparently ever having to ask for a raise.

Not me.

I’ve asked for raises or other changes to my compensation many times in my past and I’m glad I did.

As an employer, I’ve also been asked for raises — some I’ve granted, some I’ve not.  And I’ve also given raises without being asked.  (Of course, I’ve also fired people, but we’ll leave that for another post.)

Here’s how I think about this somewhat uncomfortable topic.

First, I need to be my own advocate  — because nobody else is likely going to do it.  No one else is waking up every day thinking, “Is Heidi Roizen happy in her job?  Is she challenged?  Is she appreciated?  Is she fairly compensated?  Does she have enough upside economics in our outcome?”  Even the best bosses are not thinking about this all the time.  I owe it to myself to advocate being paid appropriately for my work.

Next, human capital is a market.  There’s supply and demand of talent to fill jobs, and the market moves up and down given the roles, the sectors, the geographies, the level of experience required and on and on.  Also, in business school long ago I learned about “economic value to the customer” – that is, some things are worth more to some customers than to others in terms of the financial benefit they gain from utilizing that asset.  My skill set as a seasoned venture capitalist and board member is likely worth more to a Silicon Valley venture firm than it would be to an industrial manufacturer in Detroit (one of the many reasons I am here).  You owe it to yourself to know what your ‘market price’ is and what tradeoffs you would have to make in order to maximize your financial outcome, if that is your goal.

However, human capital markets are not perfect and the inefficiencies therein create discrepancies even among the most well-meaning employers.  For example, say you were hired early in the company’s life and the ‘market’ for your role has gotten very hot (UX designers or data scientists in the Valley, for example).  Your employer may not have the tools or make the time to keep up-to-date on the market rate for your position, particularly if the company is small and they don’t need to hire another one of you.   They won’t know they are underpaying you until you leave to take another job – unless you tell them.

Another trap is that you remain cast in your original role even if your workload increases, becomes more sophisticated, you take on managerial duties or in your spare time you gain additional skills or credentials (for example you earn that MBA over two hard years of nights and weekends).  I had this at my first employer, Tandem.  They were VERY well-meaning and yet when I helped them recruit other Stanford MBAs for summer internships from the business school class of which I was a member, those interns were actually paid higher monthly salaries than I was because my prior pay level (from before I enrolled in business school) had not been changed.

Until I pointed that out.  Then it was.

Going back to my market construct, another useful exercise is to understand your opportunity cost.  That is, ask yourself, if I weren’t here, where would I be and what would I be doing?  I used this data effectively a few years ago when I was negotiating to join a board.  On this particular board, the compensation was lower than the market while the workload was higher.  The recruiter was surprised when I asked him to increase the compensation – he said that I should consider it an honor to serve on this board, and not be doing it for the money!  I replied that indeed I considered it a great honor and I was thrilled they were asking me.  However, as board work is something I do to pay my way through life, and I only had limited slots to serve on boards, if I were to take this board I was incurring an opportunity cost because I could not take another board I was being offered that paid almost double.  I did not ask him to match the other board, but I did ask him to consider this issue from my point of view, as well as recognize that anyone else with my ‘spec’ (and this I knew from having spoken to a lot of other corporate directors about what they were making) was also going to cost a similar amount, because other candidates would likely be weighing this same opportunity cost.  They figured out a way to meet me in the middle and I think — so far —  we’re all happy that happened.

Data is a slippery slope — you have to use it wisely.  As a manager, I hate it when an employee points to someone else and calls out one aspect of that other person’s compensation and then claims the right to parity.  Sure that gal got more stock, but maybe she takes less cash comp.  Maybe she is actually worth more because even though she has the same title as you, at her firm that title means a much higher-level job.  Maybe she has experience, education or skills that commands a premium.  My point is this: don’t use incomplete or bad data to make your case.

In addition to using data wisely, timing is also key.  There are natural times to discuss compensation, such as when you are first negotiating joining the firm.  If you feel you have strong data to support that you are under-compensated, letting your manager know the data before the end of year budgeting process is a good idea.  You should also take the long view – if you are not properly compensated today, talk with your manager about what expectations you should have about your future outlook for compensation changes, and what you would have to do in terms of increased responsibilities or other actions to be more in line for growth in your compensation.  Career growth planning goes hand in hand – the easiest way to get a bigger paycheck is to earn a bigger job.

Of course, the most delicate negotiation occurs when you have been quietly looking elsewhere and you now have an offer in hand that is higher than what you are currently being paid.  Again, it’s a market, and there is no better market validation than a bona fide offer.  However, if you are using that solely as a stalking horse to get a raise, and I were your boss…well, I would sure have liked you to come to me first to tell me you were unhappy with compensation and let me have a try at fixing it.  On this tactic all I can say is every firm is different and every person is different.  For some, this is the only way to get your compensation raised, for others, it can taint the relationship forever.  Use this with caution.

And finally, here is one thing NEVER to do when asking for more money.  Never ask for it nor justify it because of your need.  If you work for a for-profit entity, as most of us do, your need is completely irrelevant.  While I can personally be hugely empathetic to your financial needs and hardships, I cannot justify increasing your compensation because of them — that is unfair to the company and to any coworker who puts in the same effort but walks away with less.

In summary:
• You have to be your own advocate — in my experience waiting in a corner to be noticed and appreciated doesn’t work for the simple reason that everyone else is too busy worrying about other things.
• Use thorough, relevant data.
• Ask at appropriate times.
• Do it in a manner that feels collaborative and non-threatening if at all possible, and seek out guidance for how to climb the income and responsibility ladder with a longer term horizon in mind.
• If you feel strongly that you deserve more, and yet you don’t get what you want, go find it somewhere else.  And if you can’t find anything better, well at least you’ve now fully determined your market price!

This article is an abridge version of one that first appeared on Heidi Roizen’s Adventures in Entrepreneurship.

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Heidi Roizen

I’m a venture capitalist, corporate director, Stanford lecturer, recovering entrepreneur and Mom.  I am the Operating Partner at Silicon Valley-based venture firm DFJ and a corporate director for DMGT (LSE:DMGT), ShareThis and XTime.  I’m a mom to two great kids and one needy rescue dog.  I’m grateful to be part of the crazy Silicon Valley ecosystem and my motto is “Life is Good (or if it isn’t, then change things until it is.)”

Visit www.heidiroizen.com and follow @HeidiRoizen on Twitter.

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